McCleery v. Allstate Ins. Co. affirms the denial of class certification in a complicated, multi-party suit alleging independent contractor misclassification

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I think it is not a stretch to opine that independent contractor misclassification is, by far, the easiest misclassification theory to pursue on a classwide basis (as compared to, for example, cases about the administrative exemption for store managers). In McCleery v. Allstate Ins. Co. (July 15, 2019), the Court of Appeal (Second Appellate District, Division One), in an opinion issued following a grant of rehearing for the second appeal in the matter, we see why there are limits to what is possible even in the comparatively straightforward arena of independent contractor misclassification. The fact summary suggests that this was too big a bite:

Property inspectors Timothy McCleery, Yvonne Beckner, Terry Quimby and April Boyles Jackson filed this action on behalf of themselves and similarly situated persons, alleging defendants Allstate Insurance Company and Farmers Group, insurers for whom the plaintiffs provided property inspection services, and CIS Group LLC/North American Compass Insurance Services Group (CIS), Advanced Field Services, Inc. (AFS), and Capital Personnel Services, Inc. (PMG), service companies contracting to provide inspection services, concocted a scheme to insulate themselves from labor laws by nominally employing plaintiffs as independent contractors while retaining control over all aspects of their work. Plaintiffs purport to represent a putative class of approximately 1,550 property inspectors in California.

Slip op., at 3-4. At the first go-round, the trial court denied certification, summarily rejected a statistical sampling plan, and concluded that individualized determinations were required for each class members. The Court of Appeal reversed, directing the trial court to consider whether proposed sampling and statistical methods could render some or all of the individualized issues manageable. After additional briefing and an extensive survey, the trial agreed that the survey was carefully crafted to maximize accuracy but still failed to address key individual issues:

However, the court found that plaintiffs’ statistical sampling alone did not render their claims manageable. It found that Dr. Krosnick’s survey results failed to specify for which insurers inspections were performed, or to explain whether the inspectors’ failure to take meal or rest breaks was due to preference or to the exigencies of the job. Also, the survey’s anonymity foreclosed the defendants from cross-examining witnesses to verify responses or test them for accuracy or bias.

Slip op., at 17. The trial court again denied certification and the plaintiffs again appealed.

While several issues were of concern to the Court, the inability of the defendants to examine any survey respondents (who were kept anonymous from the survey expert) was viewed as an impediment to the defendants’ ability to cross-examine the actual class members who participated in the survey:

In fact, plaintiffs expressly admit they intend to answer the ultimate question in this case based solely on expert testimony—testimony founded on multiple hearsay that defendants could never challenge. As Dr. Krosnick declared, “ Respondents are not testifying witnesses. Instead, . . . . [i]t is the expert who will offer opinions . . . , and the expert can be cross-examined.” But “[a]lthough an expert ‘may rely on inadmissible hearsay in forming his or her opinion [citation], and may state on direct examination the matters on which he or she relied, the expert may not testify as to the details of those matters if they are otherwise inadmissible.’ ” (Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1525.)

Slip op., at 24-25. The plan to rely, almost exclusively according to the Court, on an anonymous, double-blind survey to prove liability was viewed as a bridge too far, no matter how scientifically the survey was crafted. The Court, citing Duran and Brinker, concluded that the trial court acted within its discretion when denying certification.

I admit to having some sympathy, as it is my experience that the similar insurance, lender, and real estate property inspection industries are carefully constructed in an attempt to support the notion that the end companies requesting the inspections and setting very detailed parameters for how those inspections are to occur are not employers of the people out performing those inspections for them. What this opinion will have the tendency to do is insulate the biggest companies because of the complex hairball of crossing middle-tier vendors they have created, while directing attention to the smaller middle-tier vendors that act as the go-betweens for the insurance, lender, and real estate companies.

Happy Fourth of July!

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Today I am thankful that I can say what I want, provide for my family, and succeed by my own hand in the greatest nation in the history of this Earth.

…and if you find this image triggering, then this holiday is not meant for you.

Hot Tip: Read the Daily Journal tomorrow...

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I have it on good authority from an inside source that some wage and hour guru will express pithy commentary in the Daily Journal’s July 2, 2019 edition.

UPDATE: Turns out my sources were correct. Be sure to read the column Where Troester Stops Not Even Troester Knows.

Majority of California Supreme Court Justices conclude that the California Pay Scale Manual issued by CalHR controls over Wage Orders for public employees

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Some wage and hour decisions have broad implications. Others, no so much. Here, in Stoetzl v. Department of Human Resources (July 1, 2019), the California Supreme Court issued a decision that falls decidedly into the later category. Stoetzl concerns a trial on the issue of unpaid wages for what the Court calls “entry-exit walk time” and “duty-integrated walk time.” Sounds like we are about to get a decision about a California equivalent to preliminary and post-liminary time, right? Not so much. Stoetzl is really about whether the relevant Wage Order (Wage Order 4) or the California Pay Scale Manual issued by CalHR (read about CalHR here) controls pay obligations for “entry-exit walk time” and “duty-integrated walk time” for represented and unrepresented state employees working in prisons.

Don’t get the wrong idea. Stoetzl might impact lots of employees; California has a metric <BLEEP> ton of employees. But that’s really the only group impacted by this decision, since the tension arises as a result of the conflict between the Pay Scale Manual’s express adoption of FLSA provisions and the Wage Order’s use of California’s differing and more protective standards. On top of all that, the represented state employees are bound by a collective bargaining agreement that controls certain pay obligations.

If you want to find something of broader note in Stoetzl, it again demonstrates that less protective FLSA provisions do no displace more protective California laws and regulations unless there is an express statement of an intent to do so. Here, in this 5-2 decision, a majority of the Court concluded that the Legislature properly empowered CalHR to define state employee pay provisions, and CalHR chose to expressly adopt FLSA rules that governed such things as walk time.

The minority opinion, written by Justice Liu, with Justice Cuellar concurring, found particular fault with the majority’s discussion of the minimum wage pay issue for the unrepresented class of employees.

The Complex Litigator is moving domain hosts, so there may be wonkiness...

The Complex Litigator is moving all domain services…right about now. It may be smooth, but it may cause a day or three of strange behavior. The upside is that I can install proper certificates for secure connections, which will speed things up. Also, I can manage the domain in the same place that I manage the blog, so one less trip when things need updating.

Carry on…

UPDATE: Like, OMG, it finally worked. I spent the entire day fighting to push this transfer through.

My tech toolbox will include less of the Google hegemony

“Then they came for me—and there was no one left to speak for me.”

This is actually a shorter version of a post I tried to put up earlier today. The gist is that I am uncomfortable with a few tech giants like Google deciding what communications can be consumed when the "soapbox” is effectively a virtual soapbox now and anything you want heard must go through the Interwebs. The First Amendment isn’t directly implicated, but a few companies now have almost total control over the digital public square, and they are putting their thumbs heavily on the scale.

I read an article yesterday that commented on internal Google emails that referred to Ben Shapiro and Jordan Peterson, and Dennis Prager as “nazis.” I find that both depressing and disgusting. Depressing, as it shows that the current members of society are profoundly ignorant about the Holocaust. Disgusting, since it is simply a horrible slander.

I have heard all three of them speak more than once (Ben Shapiro and Dennis Prager mostly on the radio and Jordan Peterson in interviews). While I don’t know what lies deep in their hearts, I’ve heard nothing remotely close to justifying that abusive label by Google employees. Moreover, nothing they have to say is sufficiently awful to support an effort by Google’s employees to craft ways to exclude their content from recommendation algorithms. According to the story I read, those three individuals all had relatives that were killed during the Holocaust. Now, I happen to think Ben Shapiro, in particular, is frequently an obnoxious and arrogant punk. But at least he refuses to back down from the heckler’s veto mob, so credit for having brass ones I suppose. And not liking an opinion does not make one a “nazi.” That should go without saying. Apparently, it doesn’t.

The bottom line is that, after seeing tech companies like Google and Twitter and Facebook de-platform people while hiding behind their Section 230 immunity, I’ve decided that Google doesn’t get to look at my every purchase, newsletter and interest to make money by targeting ads at me.

I have started to view these lockstep platform bans as cartel behavior. Certain practices in the restraint of trade are categorized as being automatically unlawful. Such practices include group boycotts of competitors, customers or distributors. Implicit cartel agreements to refuse to deal with a class of customers might be per se unlawful behavior in restraint of trade.

If it isn't per se unlawful, the fallback analysis is the "Rule of Reason." I don't specialize in antitrust (at all), but this seems like a theory that should be examined closely by organizations with some resources that are being de-platformed and de-monetized.

Martin Niemöller offered the right warning; if you stay quiet for too long, eventually nobody will be left to speak out when they come for you.

The tort of "Trespass to Chattel," by itself, does not support a UCL violation

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I just wanted to write “trespass to chattel,” so this case gets a post just for that. In Pneuma International, Inc. v. Cho (June 24, 2019), the Court of Appeal (First Appellate District, Division One) was asked to review an assortment of complaints about the outcome of a trial. One issue was whether the failure to transfer ownership of a domain, the “trespass to chattel” that was at issue, constituted a fraudulent or unfair practice under the UCL. While Pneuma argued that the UCL’s “unlawful” prong is construed broadly, so there should be no resistance to borrowing the tort to serve as the predicate violation, the Court was not persuaded. After noting the dearth of authority on that particular tort, the Court said:

Although not directly relevant to whether Pneuma may “borrow” a tort as a basis for a UCL cause of action, respondents correctly observe that Pneuma may not recover damages under a UCL cause of action because remedies under the act are purely equitable in nature. (E.g., Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150-1151 [remedies provided under UCL “are limited” and “it is well established that individuals may not recover damages”].) Pneuma does not identify what additional relief it would be entitled to if it prevailed on its UCL cause of action. The trial court already ordered the equitable relief of transferring the egpak.com website to Pneuma after it prevailed on a cause of action for trespass to chattel.

Slip op., at 15. So, does this mean that, where the UCL could supply some additional relief, a common law tort could serve as a predicate violation of the UCL? More realistically, can you even concoct a scenario where it would make sense to say that a common law tort constituted the predicate violation?